THE FUTURE OF MASS-TORT LONG-TAIL LITIGATION Stephen Hoke, Hoke LLC - - PowerPoint PPT Presentation
THE FUTURE OF MASS-TORT LONG-TAIL LITIGATION Stephen Hoke, Hoke LLC (Chair) Claudia Temple, Temple Consulting (Moderator) Armando Carlo, The Boeing Company Jim Dorion, Willis Towers Watson Ronald Fiesta, Brunswick Corporation W W W . C H I C
W W W . C H I C A G O L A N D R I S K F O R U M . O R G
Stephen Hoke, Hoke LLC (Chair) Claudia Temple, Temple Consulting (Moderator) Armando Carlo, The Boeing Company Jim Dorion, Willis Towers Watson Ronald Fiesta, Brunswick Corporation
2
I. Asbestos, Talc, Pollution, Sex Abuse, Pre-conception Torts II. Restatement of the Law on Liability Insurance
3
– IL (Madison and Cook County) most active – LA, Oakland, NY, NJ,
– constant if not slightly rising – Meso claims value accounts for the rise
4
– future decline – but, increase in women and non-occupational meso claims
– impacts proximate cause / sword vs. shield
5
industrial grade
high quality / grade
6
– causing asbestos-related disease
– causing non-asbestos related disease –
– causing asbestos-related disease – causing ovarian cancer
7
Cosmetic Talc
8
Plaintiff Pool (Ovarian Cancer)
–
NIH estimates 22,240 new U.S. cases in 2018 – 14,070 women likely die of ovarian cancer in U.S. in 2018 –
– 700% more plaintiffs Future Defendants – personal care products
Takeaway: Demographics indicate much at stake – plaintiffs’ firms are “all in” – many same plaintiffs’ firms and jurisdictions as traditional asbestos
9
and Liability Act of 1980
– as of October 1, 2018, 1338 Superfund sites on the NPL
– Negligent Supervision – Negligent Hiring/Retention – Vicarious Liability – Failure to Warn/Report Misconduct
– religious institutions – daycare providers – schools – camps – scouting organizations – athletic organizations – hospitals – social service providers
11
Involves alleged tortious conduct occurring prior to plaintiff’s conception and resulting to injuries to plaintiff
– DES litigation – alleged injuries to third generation plaintiffs – claims arising out of assisted reproduction – work place exposure to parents and often exposure to plaintiffs’ fathers
– Motorola Lawsuits – eight lawsuits filed by former employees and children
– Boeing Lawsuits – four lawsuits filed by children of former employees – Same plaintiffs’ firm
12
dangers of opioids and flooding of communities with prescription pills – against manufacturers and distributors – allegations include fraud, negligence, unjust enrichment, false advertising and deceptive marketing
alleging failure to provide reasonable care and contribution to his death
Past, Present, Future
14
– Continuous Trigger most popular
– IL “Triple Trigger” (asbestos)
– Sex abuse – shorter tail – Pre-conception torts – date of loss
15
16
Different than Trigger: what happens when claim triggers multiple policies?
– asbestos – environmental –
types (IL pollution vs. asbestos)
17
“ALL SUMS”
subject to limits
PRO RATA
– “Bodily Injury or Property Damage that takes place during the policy period”
– lost policy periods – insolvencies – periods when insurance unavailable
18
“All Sums”: IL (asbestos-only), CA, DE, DC, IN, MO, NY (Viking Pump), OH, PA, TX, WA, WV, WI, OR Pro-rata: IL (asbestos PD and pollution only), CO, CT, IA, KS, KY, LA, MD, MS, MI, MN, NE, NH, NJ, NY, NC, SC, UT and VT Duty to Defend: “All Sums” applied to defense expenses CT pro-rates the duty to defend
19
– no allocation to policyholder for years when coverage not available (asbestos and pollution) – Pollution and Asbestos Exclusion widespread in 1986
– 15/15 recovery (1971-86) Vs. 15/45 recovery (1971-2016) – NY, MA, SC recently have ditched “Availability Rule”
20
– “p/o” deductible or SIR vs. aggregate – most states each claims is a separate occurrence – IL: “the decisions to use asbestos” is the occurrence (Gypsum) – denies policyholder benefit of aggregate limits
– insurers aggressively asserting (NY)
21
– primary insurer has burden vis a vis policyholder – policyholder has burden vis a vis excess
22
BEWARE : The “Qualcomm” Dilemma
– Will you ever be able to reach the excess above? No: limits can never be exhausted and policyholder not allowed to fill (Qualcomm & Comerica) Yes: policyholder may pay the difference between settlement and full limits
23
– historical policies required insurers’ consent to assign – consent rarely acquired
– complicated post-transaction disputes
– California S.C. overturned – Fluor Corp. v. Superior Court, 61 Cal. 4th 1175 (2015) – trend is now policyholder friendly
24
– Insurers increasingly difficult in mass-tort claims
– IL does not strictly enforce “sudden and accidental”
– defendant must have a local connection
26
– kind of a “Best Practices” for resolving legal questions – advice to courts – not binding on courts – does not create law – But, frequently influential
– “first-ever” for liability insurance – approved by American Law Institute – who is the ALI?
27
– “American Law Institute’s approved Restatement of the Law, Liability Insurance does not constitute the public policy of Ohio.”
28
– Pro-rata by years is “the most consistent, simplest and fairest solution to this problem.”
rule.
– e.g., if the policy does not include the “during the policy period” limitation
29
– Policyholders to be allocated years in which no insurance available – “Fair because all trigged years, include the years in which the insured did not purchase insurance, share equally in the indivisible losses.”
– 40 years of court decisions poorly decided
– Consequences
30
– (a) without a “reasonable basis” for its conduct; – and (b) with knowledge of its obligation to perform or in “recklessly”
31
deciding to issue the policy
presented by the policyholder’s application that an insurer would have not issued the policy or issued it under substantially different terms.
misrepresentation caused it “significant harm.”
32
Damages available to policyholder:
– Reasonable defense costs or settlement costs
the timely assistance of its insurer.”
useful guide to what is reasonable
– Adverse judgment against the policyholder – after insurer failure to settle
– Any other loss, including incidental or consequential, caused by the breach if foreseeable
33
– insurer may recoup defense costs if later determined claim not covered – not the law in IL and many other states
– attempts to clarify “known loss,” fortuity and “expected and intended” – exists if policy policyholder “substantially certain” claim impacting insurance likely
– more weight to custom, practice, and usage (discourages extrinsic evidence?) – “plain meaning”: dictionaries, court decisions, statutes and regs, and secondary legal authority
35
wording
losses
cases.
36
Federated Mut. v. Grapevine Excavation, 241 F.3d 396 (5th Cir. 2001)
Waste Mgmt. v. Int’l Surplus Lines Ins. Co., 579 N.E.2d 322 (Ill. 1991)
37
General Rule - insurer must conduct reasonable investigation before a denial
Post-Denial
– trend of filing DJ suit first, denying coverage later – IL estoppel rule promoting litigation by insurers – jurisdiction is everything – especially in long-tail cases
38
39
Insurer too aggressive
settlements
claims that incur an indemnity
– porcupine bad faith defendant” – appears to be a strategic business decision – notable policyholder victories, but outweighed by losses
Insurer not aggressive enough
reduce exposure is to try cases
40
– e.g., specific intent vs. “reasonable woman” – gross negligence / recklessness vs. something less
– Statutory: IL limits to $60k and attorney fees – Tort remedy for failure to settle within limits
– Understand applicable law before considering options – What is applicable law?
– pattern of improper claims-handling – practice Tip: Each claim is a separate potential violation
41
– especially in long-tail situation – consult coverage counsel if necessary – insurers have lawyers on speed- dial
– poorly considered response may prompt insurer to file DJ
42
– pro rata only in U.K. and Home
– complex rules - cheaper and better to out-source recovery – can monetize immediately
– someone always eager to underwrite
44
Options either expensive or aggressive – Generally only for serious claims
– Two approaches
45
– limited market / very expensive
– isolate the liability, typically in a subsidiary
– avoid piercing of the corporate veil and “alter ego”
– possibly sell “litigation shell” to third-party
46
Millennials are 1/3 of jury pool Educated May be “status inconsistent” Quiet in voir dire – active on-line Homogeneity is a problem – convergence Commerce & conscience Higher standard (perfect) Social justice crusaders Sympathy driven, want to show compassion “Can’t let the company off the hook” “Not going to give a lot . . . maybe $5M”
Smart plaintiff counsel Get rid of “low damages” jurors “How many of you think the judicial system is broken?” Those that remain less willing to take a stand Run MIT algorithm to skew towards emotional/moral decision making
W W W . C H I C A G O L A N D R I S K F O R U M . O R G
51
– a degenerative brain disease brought on by continual head trauma
– NCAA, NFL, NFL – some suits against individual institutions, associations and conferences – helmet makers
52
– corporate headquarters typically
– unusually strong in coverage actions – cases often won or lost before filing
53
– IL: wrongful – insurer estopped if doesn’t file coverage action – estoppel – applies to exclusions, conditions
– insurers increasingly deny on corporate successor issues – RM should play active role in transactions to preserve insurance
54
What is Trigger of Coverage? Trigger Theories
causing conditions occurs (“DOFE”)
55
2d 23 (I987)
– exposure, manifestation and diagnosis - “triple trigger” – most jurisdictions apply continuous trigger – insurers advocating more aggressive positions
–
–
– but, the future battles over Allocation
56
Non-Cumulation
Deemer Clauses – deems a particular date in the progression of injury or damages the relevant triggering date
57
– In re Viking Pump, Inc., 52 N.E.3d 1144 (N.Y. 2016) – asbestos case
–
– IL App. CT. in Outboard Marine found non-cumulation clause unenforceable for public policy reasons
–
58
59
– IL cts. increasingly finding late notice
– prejudice vs. non-prejudice
– if notice late and policyholder delay not reasonable – no coverage delay, insurance – prejudice a factor whether notice reasonably delayed
60
– single occurrence limit vs. aggregate – “per occurrence” deductible or SIR
–
Gypsum had p/o deductibles so pro-policyholder – Nicor (IL Sup. Ct.) adopts Gypsum - only one occurrence limit available
61
– some courts found “sudden” as ambiguous – including Illinois – most states require some showing of “sudden” release
– eliminates coverage for “sudden” – typically enforced – Illinois limited to traditional environmental contamination – litigation ongoing over asbestos, carbon monoxide, noxious smells
62
63
– U.S. Supreme Court in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017)
no matter how similar their claims may be — in states with no connection with claim
64
– first encounter rule – exposure rule
expected or intended injury / inferred intent rule
negligent hiring
66
67
68
have plowed through all of the fine print and separate sections in an effort to understand the many terms and conditions listed in the main policy and the convoluted additions thereto.” Nat. Mut. Ins. Co. v. Curtis, 867 N.E.2d 631, 636 (Ind. Ct. App. 2007)
status reports; details of settlement negotiations